Entertainment retailer HMV saw its shares fall more than a fifth on Friday
after it launched a massive sale in a bid to boost revenues.

The slump means that HMV shares have fallen 34pc over the past week as traders prepare for a crucial Christmas trading update from the company, which could come as early as next week.

The beleaguered high street retailer is also in negotiations with its banks about an expected breach in debt covenants this month and warned in December that it faced “material uncertainty” about its future.

A source close to the company claimed that the promotion – which will offer 25pc off certain products for the next month – is “nothing to do” with the debt negotiations and has been produced by the marketing team. Although HMV did not conduct the “blue cross sale” last year, it held a similar promotion in 2011.

Shares in HMV closed down 0.345 at 1.20p, valuing the company at just £5.2m.

The problems of HMV, which has 238 shops and 5,000 staff in the UK, are another setback to the high street, which has suffered the collapse of JJB Sports, Comet and Jessops in recent months.

Jon Copestake, retail analyst at the Economist Intelligence Unit, said: “Although HMV have been swift to play down any significance of this 25pc-off sale, the timing and background of the announcement will certainly raise eyebrows.”